Debt and demand regimes in simplified growth models: a comparison of neo-Kaleckian and Supermultiplier models

Abstract The paper compares stock-flow consistent (SFC) versions of extended canonical neo-Kaleckian and Supermultiplier models that deal with either households’ or firms’ debt accumulation. This comparison aims are twofold: (i) to evaluate the differences of a debt accumulation process in these models due to their specific closures; (ii) to provide a pedagogical tool for understanding the basic features of each model when dealing with similar issues. In the short run, we find that the relation of debt ratios, demand and growth is similar for both models. In the long run of the Supemultiplier model, only the Minskyan debt regime is economically viable for the firms’ sector. As for the household sector, the paradox of debt is indeed a feature of the canonical Supermultiplier model, yet there may be episodes of rising debt-to-income ratios. As for the neo-Kaleckian model, firms’ leverage ratio can be either pro- or anti-cyclical; in the household sector, the absence of the paradox of debt seems to be the most likely scenario.